White House increases tariffs on Chinese medical products

The White House on Tuesday announced that it will raise taxes on several imported Chinese goods, including medical products. The medical products that will see increased tariffs include syringes, medical masks, respirators, and gloves.

Syringes and needles, which are currently not taxed, will be taxed at 50% beginning this year. Similarly, the tariff on respirators and face masks will increase from their current range between 0 and 7.5% to 25% this year. The tariff on rubber medical and surgical gloves will not go into effect until 2026, increasing from 7.5% to 25%.

"These tariff rate increases will help support and sustain a strong domestic industrial base for medical supplies that were essential to the COVID-19 pandemic response, and continue to be used daily in every hospital across the country to deliver essential care," the White House said in a fact sheet.

The government is also planning to increase tariffs for other products, including steel, aluminum, semiconductors, electric vehicles, and more.

How could these tariffs impact healthcare?

According to Soumi Saha, SVP of government affairs at Premier, tariffs on steel, aluminum, and semiconductors could impact the healthcare industry by disrupting the production of hospital beds, surgical equipment, and other medical devices.

Currently, it's not clear whether the tariffs will lead to product shortages, but Saha said that specific products may be at a higher risk than others. Healthcare industry manufacturers will likely face greater competition for materials like steel and semiconductors.

In addition, Saha noted that prices for medical products will likely increase unless tax credits and other financial incentives are used to offset the costs of moving operations to the United States or outside of China.

In response to the tariffs, the American Hospital Association (AHA) said that while it supports domestic manufacturing, the increase in costs could negatively impact hospitals.

"[The AHA] is concerned that these tariffs will lead to higher prices for high-volume medical supplies such as [personal protective equipment] and syringes that will exacerbate and prolong the financial headwinds that hospitals face today," said Roslyne Schulman, AHA's director of policy.

For their part, domestic manufacturers welcomed the new tariffs and said that they would be ready to meet increased demand, much like they did during the COVID-19 pandemic.

"Our member companies can compete with manufacturers globally," said Eric Axel, executive director of the American Medical Manufacturers Association. "All they ask is for a level playing field because they have no doubt that American ingenuity and quality will win out."

Congress advances bill to restrict business with certain Chinese biotech companies

Federal lawmakers are also taking action against Chinese healthcare companies. On Wednesday, the House Committee on Oversight and Accountability voted to approve the bipartisan Biosecure Act, which could push U.S. pharmaceutical and healthcare companies to reduce their reliance on Chinese manufacturing and research.

Under the bill, U.S. companies have until 2032 to end their contracts with certain healthcare or biotech companies, including WuXi AppTec, BGI, and Complete Genomics. These companies are either based in China or are subsidiaries of Chinese companies.

The bill would also prohibit federal agencies from contracting with these companies or contracting with companies that use the targeted companies' services or equipment.

According to Reuters, supporters of the bill say that it is needed to protect Americans' health and genetic information from foreign adversaries, who could use it to create bioweapons. They also said that it's dangerous for China to control most of the biotechnology supply chain.

"U.S. taxpayer dollars should not be funding (Chinese) biotech companies that are actively working with the CCP [Chinese Communist Party] and the People's Liberation Army to potentially collect Americans' genomic data and intellectual property and use that data to further their authoritarian objectives," said Rep. Raja Krishnamoorth (D-Ill.), who introduced the bill in the house with Rep. Brad Wenstrup (R-Ohio).

Similarly, Rep. James Comer (R-Ky.), chair of the House Committee on Oversight and Accountability, said that "[t]his bill is a necessary step towards protecting America's sensitive healthcare data from the CCP before these companies become more embedded in the U.S. economy."

For their part, the targeted companies say the bill is based on false and misleading allegations and would lead to competition being limited. BGI, one of the affected companies, also said the bill would drive the company out of the United States.

"I do think you're seeing a trade war develop between China and the U.S. on health-related items," said Chris Meekins, managing director at Raymond James. (Lawrence, STAT+ [subscription required], 5/14; DeSilva, Modern Healthcare, 5/16; Landi, Fierce Healthcare, 5/15; White House fact sheet, 5/14; Goldman, Axios, 5/15; Freifeld, Reuters, 5/15)

Explore our latest supply chain research, including case studies from high-performing providers and suppliers and results from our survey of health system purchasing leaders.